The Model S electric sedan sits in a Tesla showroom in Washington, D.C.

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Originally published on June 22, 2012 10:46 am

The Tesla electric car company has high hopes for its new Model S, which it calls "the world's first premium electric sedan." The new car, which is being delivered to customers Friday, is priced at around half the cost of the only other Tesla model, the svelte, two-door Roadster.

The new car's sticker price starts around $57,000; a $7,500 federal tax credit drops the starting price just below $50,000. But like its gas-powered cousins, this electric vehicle has so many options available that its price can soar to near $100,000.

"It's certainly not mass market by General Motors or Toyota standards," Edmunds.com senior analyst Michelle Krebs tells Morning Edition co-host Renee Montagne. "Tesla says they're going to make 5,000 of these this year, and then increase the production next year. So it still really is a niche vehicle."

The base model's battery can be upgraded from a capacity of 40 kilowatt-hours to either 60 or 85 kwh. According to Tesla, the performance version of the Model S can propel itself from a standing start to 60 miles per hour in 4.4 seconds.

Those larger batteries also bring the ability to drive farther on a single charge — about 265 miles, says the Environmental Protection Agency, which beats all other electric vehicles on the market. The EPA performed its tests with an 85 kwh version of the car, with an estimated sticker price of about $70,000.

Expressed in the EPA's "miles per gallon equivalent" used for electric vehicles, the Model S gets a combined 89 mpg — which the federal agency equates to about $700 in annual fuel costs, if you drive 15,000 miles in a year.

In the cabin, a Wi-Fi-capable 17-inch touch screen is mounted on the central dashboard to the right of the steering wheel. Its display options include a running tally of the car's consumption and real-time data on miles remaining.

"There is what's called in the industry 'range anxiety,' " Krebs says. "And that's where people are leaning more towards hybrids and plug-in hybrids, because it eases that worry."

As the Model S hits the streets, the California-based Tesla finds itself in an improving car market — sales projections for new vehicles in 2012 now stand close to 12 million, according to a new report by J.D. Power and Associates.

And Krebs tells Montagne that by Edmunds.com's count of electric and hybrid vehicles, "50,000 were sold in the month of March."

But there's a danger that the market's momentum might leave Tesla in its dust — because so far, at least, demand for electric and hybrid cars has moved in lockstep with gasoline prices. And over the past few months, gas prices have fallen.

Sales of electric and hybrid vehicles peaked at 4.6 percent of the market in April, when gas prices were higher, according to J.D. Power. That number has now fallen to 3.4 percent.

Speaking with shareholders earlier this month, Tesla founder Elon Musk — whose enterprises also include PayPal and SpaceX — reportedly told investors that the company had taken deposits from more than 10,000 customers for the Model S. He also said that Tesla needs to sell about 8,000 of the cars to break even, according to Bloomberg.

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Transcript

RENEE MONTAGNE, HOST:

A California car company today is launching yet another electric car onto the road. Tesla will start selling the Model S, S as in sedan. Until now, Tesla has been known for a pricey sports car that's popular among the environmentally conscious elite. This Model S is aimed at a lower income demographic - lower being a relative term here, though.

To talk more, we called Michelle Krebs. She's senior analyst for the automotive information website Edmunds.com.

Michelle, welcome to the program.

MICHELLE KREBS: Thanks for having me.

MONTAGNE: The price of this new Model S is $57,000. Who does Tesla think will buy it?

KREBS: Well, I think they want to expand to a wider audience. The previous car was a two-seat roadster. This is a four seat sedan. And yes, $57,000 is still a hefty price tag. And by the way, that's the lower priced one. They go all the way up to over $100,000, depending on how much power you want and performance.

MONTAGNE: Well, people, though, are making a big deal out of the affordability of this sedan because Tesla's previous cars were costing six figures. So how does one come up with 50 grand? I mean can this really be a mass market car?

KREBS: Well, mass market is a relative term here. It's certainly not mass market by General Motors or Toyota standards. Tesla says they're going to make 5,000 of these this year and then increase the production next year. So it still really is a niche vehicle. And in fact electric cars in general are niche vehicles.

MONTAGNE: So but in terms of its production, what does this say? Is it the future or is this just a car that would be fun to have for those who can have maybe an extra car?

KREBS: Electric cars are - they're slowly making progress, but one of the bigger problems is we don't have an infrastructure where you can just go charge a car at work or you have to have charger at home. People are leaning more towards hybrids or plug-in hybrids, like the Chevrolet Volt, the Toyota Prius plug-in hybrid, so that they can still have that gas engine just in case.

MONTAGNE: Why? Because people, when it's a purely electric car, people are a little bit afraid to get out onto the open road because - I mean they're just - they don't have electric stations like they have gas stations.

KREBS: Well, exactly. For example, I was driving an electric car a week or so ago. I looked up how far I had to go. I knew I had 80 miles of range, and that was like the perfect conditions. And it turned out to be a very hot day so, you know, I saw that charge go down. Well, I was a little nervous. Was I going to make it home on this charge? And you can't just pull into a station, top it off and make it all the way home. So there is what is called in the industry range anxiety, and that's where people are leaning more towards hybrids and plug-in hybrids because it eases that worry.

MONTAGNE: So cars that are not purely electric cars, I mean the hybrids, how are they doing in general?

KREBS: Well, in general they follow gas prices. So we saw an interesting phenomenon this year. Gas prices started to go up in February, March and April, and we saw all these cars - we total them altogether - electric cars, hybrids, plug-in hybrids - 50,000 were sold in the month of March. Then gas prices ease off and the sales start going down. So they clearly follow gas prices.

Now, they're doing better than they were, say, a year ago, and we're going to see more and more of them on the market, and they're becoming more and more affordable. For example, Toyota just introduced an entry-level Prius called the Prius C. It's like about $20,000. Well, that seems to be hitting the sweet spot and they can't build enough of them. They are in very short supply. If you want one, you're going to pay full list price and you're going to have to probably wait in line.